Press Release

VIS Credit Rating Company Reaffirms Entity Ratings to Lucky Textile Mills Limited

Karachi, December 19, 2022: VIS Credit Rating Company Limited has reaffirmed entity ratings of Lucky Textile Mills Limited (‘LTML’ or ‘the Company’) at ‘AA-/A-1’ (Double A Minus/A-One). Long Term Rating of ‘AA-’ denotes high credit quality; protection factors are strong. Risk is modest but may vary slightly from time to time because of economic conditions. Short Term Rating of ‘A-1’ signifies high certainty of timely payment; liquidity factors are excellent and supported by good fundamental protection factors. Outlook on the assigned ratings is ‘Stable’. Previous rating action announced on December 28, 2021.

Assigned ratings take into account strong sponsor profile, as the Company is wholly owned subsidiary of Y.B. Holdings (Private) Limited, which is a leading conglomerate in Pakistan having strong financial profile and diversified presence in sectors including power generation, building materials, real estate, textile, chemicals, pharmaceuticals, food, entertainment and automotive sectors. Ratings encapsulate business risk profile of LTML’s composite textile mill operations, which include spinning weaving, processing, and stitching. LTML’s gross margins remained strong during the period under review (FY22 and Q1’FY23) and are viewed to be aligned with peers. The management foresees strong revenue growth to continue in FY23. Nevertheless, ongoing recessionary trends in major export markets may prove challenging in terms of achieving strong topline growth and maintenance of margins. Ratings incorporate LTML’s diversified business risk profile, as the Company has a sizable portion of revenues arising from its portfolio of non-financial and financial assets. Going forward, given uncertainty of demand in textile and automatic sector, the Company’s profitability may be impacted to some extent, albeit overall profitability is likely to be supported by returns from power/energy sector investments and yield on financial assets portfolio.

Strong growth in revenues and stability in margins translate in very strong cash flow coverage indicators and hence a strong debt servicing capacity, which compares favorably to peer median. Liquidity profile of the Company remains strong, given adequately high coverage of short-term borrowings by inventory of stock and trade debts. Current ratio has remained consistently above 1.7x, supporting the short-term rating assessment of the Company. Given an increase in debt level, we have noted an increase in LTML’s gearing, however, financial risk profile continues to compare favorably to peer median. The assigned rating remains dependent on maintenance of business and financial risk metrics.

For further information on this rating announcement, please contact Mr. Arsal Ayub, CFA (Ext: 215) or the undersigned (Ext: 201) at 021-35311861-66 or email at info@vis.com.pk.

Information herein was obtained from sources believed to be accurate and reliable; however, VIS Credit Rating Company Limited (VIS) does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information.VIS , the analysts involved in the rating process and members of its rating committee do not have any conflict of interest relating to the rating(s)/ranking(s) mentioned in this report.VIS is paid a fee for most rating assignments. This rating/ranking is an opinion and is not a recommendation to buy or sell any securities. Copyright 2022 VIS Credit Rating Company Limited . All rights reserved. Contents may be used by news media with credit to VIS .